Japan's Cosmo Oil Company will slash the volume of Qatar crude oil it purchases in its yearly contract that starts from August, industry sources said on Tuesday, amid falling demand.

The country's fourth-biggest refiner, which has a contract for about 70,000 barrels per day (bpd) of Qatar Land and Marine crudes for this year, will cut this by more than 20 per cent, one of the sources said on condition of anonymity because the information is not public.

'Its been cut and the previous contracted amount won't be extended,' the source, who has direct knowledge of the matter, said.

A company spokesman declined to comment on the matter.

The move comes after Cosmo Oil announced earlier this year a reduction of 80,000 bpd in its overall refining capacity, joining several Japanese refiners in their efforts to tighten the country's refined product market.

Oil demand has been declining in Japan for years as the country's population greys and manufacturers shift operations abroad, with the fall seen continuing as the Pacific nation steps up its efforts to use less and cleaner energy.

Demand destruction has led oil refiners in the world's third-largest oil consumer nation to trim volumes from Middle East producers as their contracts for 2010 term crude supplies come up for renewal.

Earlier this year Cosmo Oil cut its purchases of Iranian crude oil, and late last year, Seibu Oil Co, a Showa Shell Sekiyu KK group company, reduced its contracted volume of crude oil from Kuwait for 2010.

Qatar is one of the smallest members of the Organization of the Petroleum Exporting Countries and in 2009 supplied a little over 10 per cent of Japan's crude imports, according to trade ministry figures.-Reuters